Figures from the UK national statistics agency announced yesterday showed that consumer price index (CPI) of UK in June rose 0.5% compared with the same period last year, higher than the increase forecast of 0.4% and the rise of 0.3% in the previous month. Core inflation, excluding energy and food prices, rose from 1.3% to 1.4% over the same period last year.

Positive inflation data did not bring more support to Pound after the International Monetary Fund (IMF) sharply lowered its growth forecast for the UK economy. According to the IMF, Brexit would make the growth of UK fell by nearly 1% in 2017 from the forecast of 2.2% to 1.3%. The agency also stressed that increasing instability following the referendum in the UK forecasts domestic demand weakened significantly. British Pound was under pressure after credit rating agency Moody's warned the UK's economic growth will slow significantly in the short term. Prospects for growth in the medium term will continue to weaken if UK doesn't reach a trade agreement with EU in the case of this country officially out of the coalition.

EUR/USD fell back yesterday 1.10 threshold after the economic sentiment index by ZEW's survey of the German economic prospects in the next 6 months dropped from 19.2 points to minus 6.8, lower than the forecast of analysts at 8.2. Indicators on the Eurozone also fell from 20.2 to minus 14.7 over the forecast of 12.3. ZEW survey showed investors and economists are pessimistic about the prospects of Eurozone after Brexit.

The market's attention focus on the results of the meeting of the European Central Bank (ECB) launched tomorrow. Analysts predict ECB will not have any change of policy in this session. However, ECB President Mario Draghi might open the possibility of economic stimulus in the near future if the area economic outlook deteriorated due to the influence of Brexit.

The commodity currencies dropped sharply in yesterday's trading session. Canadian Dollar CAD weakened when oil prices on world markets continue to decrease to the 4-month low. Meanwhile, the possibility of cutting interest rates of Reserve Bank of Australia (RBA) in August was up to 60% after the minutes of the July meeting of this agency announced yesterday that the AUD strength is difficult for rebalancing economy and it emphasized that inflation expectations remain below the targets, this suggests the possibility of easing further monetary policy in the near future.

AUD/USD: SELL: 0.7520 TARGET: 0.7440; STOP-LOSS: 0.7560

Thong Le

Published in Trading strategies

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